PTEC project that council invested £1m in now on hold

Without the “financial support mechanism” in place, officers say it would be unwise to move forward with the scheme, so the Perpetuus Tidal Energy Centre (PTEC) which promised skilled jobs and renewable energy is on hold. It’s unclear whether the council will ever see the return of their £1m unsecured loan.

PTEC-Underwater-turbines - and keplar scheme

At last month’s Isle of Wight council scrutiny committee, Cllr Michael Lilley raised a number of questions in relation to the Perpetuus Tidal Energy Centre (PTEC).

Following a £1,000,000 investment by the former Conservative-led Isle of Wight council, the tidal array demonstration site and development centre was due to be built in 2015/2016.

The scheme received approvals in 2016, but answers to Cllr Lilley’s questions now reveal the project is now on hold.

Below are the questions asked and answers received from officers at Isle of Wight council.

Grant bid “unlikely to succeed “
1. Did PTEC ( or any partner organisation) submit a bid for a contract for difference grant in the government’s second allocation round which closed for applications on 21st April? If not, why not?

It is suggested this query be directed to the company. The council was not involved with any bid from PTEC.

We are aware however that the company did not submit an application, as the government had not ring fenced monies for wave and tidal, so as a consequence it has been realised by the tidal industry as a whole that any application would be unlikely to succeed as they could not compete with any offshore wind bid, with offshore wind being likely to oversubscribe the monies available.

On hold
2. What are the latest estimated dates for:
a) Commencement of onshore and off shore construction.
b) Completion of onshore and offshore construction.
c) Full operation of the tidal project.

All dates are in abeyance due to the Contract For Difference situation.

The PTEC and the industry as a whole are lobbying the government to come up with an alternative financial support scheme to allow this industry to grow beyond its current early development situation. Several avenues are being explored.

The project is ready to go with all relevant permissions in place – although some shore based planning permissions are under some time pressure – but it would be considered unwise to move on from this point without the financial support mechanism in place.

£1 million investment an unsecured loan
3. What will happen to the IW Council’s £1 million loan to PTEC Ltd if the scheme is delayed and how is it secured?

In the Cabinet report dated 8 January 2013 which can be found under Archived committees – Cabinet, it makes clear at paragraph 30 that the £1 million investment will be treated as an unsecured loan.

The company is required to repay the council’s loan before repaying loans to private investors or dividends on earnings.

In paragraph 49 of the report to Cabinet – its said

“There is a risk that the council will not recover any or all of its investment in the SOEC project should it not become a fully operational facility. This will only become clear at the end of phase 1 of the project when consenting is completed and further debt and equity have been confirmed for the project.

“The works completed at the end of phase 1 are however still likely to have a value and could generate a financial receipt if others were prepared to acquire these assets and take the project forward. The value to the council would be further enhanced as it would still own the option to take the lease of the seabed for phase 2 of the project. Para 50 goes on to say – Even if the project proceeds it is possible that its earnings may not be of the expected scale to provide the projected returns to the council.

“The council would however be the first of the investors in the project to have its initial loan investment repaid and this does increase the likelihood of it recovering at least its initial investment in the project. The council’s primary concern however, has always been to secure the wider economic benefits of SOEC for the good of the island’s economy and therefore the creation of SOEC could be seen as a success in its own right before the return on the council’s investment in the project is taken account of.”

Any views or opinions presented in the comments below are solely those of the author and do not represent those of OnTheWight.

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9 Comments on "PTEC project that council invested £1m in now on hold"

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electrickery
Somebody in IWC clearly doesn’t understand the basics of business: “The company is required to repay the council’s loan before repaying loans to private investors or dividends on earnings” – required, eh? Bring on the Magic Money Tree. Is IWC seriously thinking it might swap the tidal scheme to offshore wind? Who was it who was so dead against Navitus Bay? Congrats to Cllr Lilley (Green) for… Read more »
Tim

I’m not sure why the IWC is speculating with taxpayer’s funds at all, surely this sort of “investment” is far more suited to private equity investors?

Colin
This was supposed to be a tidal array demonstration site and development centre as mentioned in the article. Previous articles included one quoting Andrew Turner saying this would bring hundreds of jobs to the area. Ho Hum. PTEC was only going to be able to do anything if it was able to access grants, having no money of it’s own. Siemens pioneered work at Strangford Lough in… Read more »
bbrown

Funny how the Meygen project ( https://www.atlantisresourcesltd.com/projects/meygen/ ) is progressing and generating power from large turbines and Sustainable Marine Energy beat a hasty retreat to Scotland with very little news on their progress. How can our council give an unsecured loan???

patsy
The Tory administration set up a Public Private Partnership (PPP) with Perpetuus Energy in January 2013. Neither this company nor its Island officers had any experience whatsoever in this technology. The paper which proposed the deal admitted that it was usual for the private partner to provide investment funds. In this case however the IOW Council would advance an unsecured loan of £1 million and Perpetuus Energy… Read more »
Black Dog
I thought the figure the IoW council invested is £1.6 million. Was the council at the time as well as the last administration (when the second installment was paid) negligent with public funds?. I for one would like to have the due diligence carried out by the council scrutinised by the ombudsman. Only in La La land would anyone think of investing (allegedly) £1.6 million for a… Read more »
patsy
According to the paper presented to the IOWC in January 2013, the 85% shareholders were not required to invest funds at the preliminary stage. As the project failed to get off the ground, the answer is that Perpetuus Energy (80%)and the smaller company (5%), the answer is none. Interestingly the time invested by IOWC permanent officials (including the now Chief Executive John Metcalf) has never been costed… Read more »
Black Dog

Disgusting.

Who is responsible for this appalling deal? Whoever they are they should face action by the authorities

hermit

Black Dog, I think it was the previous Conservative Council, those who got back in now, so I’d ask them. However, they don’t like scrutiny, so you won’t get far

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